How to Make Money in a Slow Real Estate Market

Mike DeHaan: [0:00] Really quick before the show starts, in case you haven't heard, we have a growing community of investors called the scale community, which is full of people learning to make massive income with their real estate businesses so they can reach financial freedom a little bit faster than building a rental portfolio solely over time, because honestly, that takes decades, and who has time for that? So if you're an investor who is serious about growing and creating a scalable business without needing to be a slave to it twenty four seven, then go to collectingkeys.com/scale and apply. And if you're a good fit, we would love to have you join the community. So, collectingkeys.com/scale. Go ahead and apply, and we'll see if you're a good fit.

Dan Austin: [0:38] There could be at a point in time where we're at history that new construction in a from a residential buy and hold standpoint could be better than that whole, like, buy a shitty house thing or a shitty multifamily. Hey there. Welcome back to another episode of the collecting Keys Real Estate Investing Podcast, the podcast where we teach you how to make massive income, not just passive income, because who cares about passive income? Maybe Dylan. I don't know.

Dylan Koch: [1:03] Sometimes. I mean, there are days where I feel like this is great. And other days, I'm like, these are more headache than they're worth.

Dan Austin: [1:09] So When it's not so passive, you're like, I don't like it.

Dylan Koch: [1:12] Yeah. Whoever tells you it's passive is lying or selling you a course. So

Dan Austin: [1:16] Yeah. Do we have a course we could sell on that one? Mike's not here, so you're gonna have to stick with Dylan and I. I don't know if we have a passive income course, but we could sell it if you wanna buy it. At least I know some gurus that'll sell it for us.

Dylan Koch: [1:26] Yeah. It'll be $9.99.

Dan Austin: [1:30] No. No. No. No. It's $997.

Dylan Koch: [1:33] Oh, okay.

Dan Austin: [1:34] Yeah. Because people don't know people know the $9.99 trick, they don't know the $9.97 trick.

Dylan Koch: [1:39] Well, isn't it interesting to give like a low cost item and then upsell once they get the

Dan Austin: [1:43] Like the small, medium, large?

Dylan Koch: [1:45] Yeah, I don't know.

Dan Austin: [1:45] Oh, that's actually funny. So, okay. I was just on a sales call with a scale community prospect, And I was like, Do have any questions? Like, We're talking. Have a good time. He's from the Northeast. And at the end of it, he's You know I do have a question. He's like, All right. Be honest with you, man. Do you have any upsells after this? Like, Am I gonna pay you, and then you're gonna upsell me? And I was like And he has participated in somebody else's course, somebody that lives in Ohio, I think, near you. And you know the shtick there.

Dylan Koch: [2:11] I already know who it is.

Mike DeHaan: [2:13] Yeah. And I was

Dan Austin: [2:14] like, honestly dude, we should get some upsells, but we don't. We legit have one product, and that's like it. That's like show up to our community, dude. Laughed so much inside when he said that I was like, A, that's a great question. B, I appreciate your honesty. And C, it's just freaking hilarious that he had to ask that. There's so many dumbass out there. And I know because I've had Mike and I have hired coaches, and they talk about stuff, business coaches, but then they talk about their model after you get to know them. And they're like, You gotta always have enough sell. Always have enough sell, brother.

Dylan Koch: [2:43] You hear that from like Khormozi's too, and it's not a bad business thing. Think the problem

Dan Austin: [2:47] that a

Dylan Koch: [2:47] lot of people run into is like that initial thing that they pay for, they get so little information that it almost forces them to get the upsell. And it's like, you have to deliver some kind of value before you can even ask for that.

Dan Austin: [2:58] And I will say that, yes, from a business standpoint it makes a ton of sense, but like when you're trying to build a community, it makes less sense because it's hard to run a community when all the people know all you're doing is trying to monetize them, and at every corner you're And trying to sell them so for what we're doing with the scale community, we're not trying to upsell. We're not trying to like make this a huge profitable enterprise. We're trying to legit build a community because we have a lot of fun with people, and we learn shit too from people. So, I mean, I've learned a ton from people in the community. And it's cool when you get a community from different backgrounds and all that stuff, because then they just they're interesting, and you can learn new things that shit you didn't even know you need to learn.

Dylan Koch: [3:36] Yeah. And you can just literally post in the Slack channel and be like, hey, this is going on. You're gonna get four, five, six different responses from people who have been in that situation before. Yeah. At least know what questions that you should be asking.

Dan Austin: [3:46] Exactly. And in maybe other groups, you're gonna get a post that links you to a Stripe account to pay for the one on one coaching for that answer. By the way, so you guys are it's gonna be a little bit better episode because Mike is in Thailand right now for the next month. So we did prerecord some shows before he went. It was weird because he texted me today. So I went to Thailand like, I don't three or four years ago, four geez, four years ago now, maybe right before COVID happened. And you know, I've told Mike about my experience, and there they have a lot of ladyboys. Like it's a big part of their culture. And in particular in Bangkok, there's this area called Ladyboy Alley, which is literally just like an alley, which is like a road really of just bars and ladyboys. And so Mike was texting me last night, and he was like, hey, can you give me the grid coordinates for that Ladyboy Alley? I was just just wanting to make sure, you know, I'm not near it. And I was like, I know what you're doing. So he might come back with a, I don't know, a new perspective on life.

Dylan Koch: [4:43] I hope he's having a great time.

Dan Austin: [4:46] Anyways, I had to bring that one up. So, marketing. I was talking to you, and I talked about this in the scale community in our coaching call today. Been super slow right now. October's a big month for us historically, and it is a big month. We've got a ton of closings. We have a lot of money coming in, a lot of accounts receivables from our wholesale deals and stuff like that. But right now, this week in particular, and a little bit last week, it just felt like new leads coming in have been slow. There's not a lot of low hanging fruit that just comes in. When you're doing big marketing batch, you usually have that one slam dunk deal out. When you're doing a big batch and you're expecting three to four or five deals a month, I don't know if you have this experience, but there's always that one where you just know it's a deal right away, and you still have to work for it. But we haven't had any of that. It's been super friction y. I don't know. What is your take? Are you feeling the same thing or what? Because I know you're ramping up marketing.

Dylan Koch: [5:37] Yeah. So shame on me. I'll I didn't send out any marketing in September. We just had that baby come in. Oh, yeah. And so I but I just sent out, you know, my largest mail today, is like 24,000 postcards, I think. But they got sent out every two to three weeks. So like some of those are starting to pour in. But it lately has been kind of that where you have to work for these a lot more. And like, the time from initial outreach to contract is a lot longer than a lot of the slam dunk ones that we used to have. In fact, like, don't think I've had one since probably April or May.

Dan Austin: [6:09] Right. That was easy. That was easy.

Dylan Koch: [6:12] Yeah. And like, I feel like although now, like to this, we were still still are flipping some places. We have two or three that are going right now. But I just listed one that's in a great part of town. Like, you know, I thought I underpriced it. And we only had a couple showings. And I was like, oh, shit. We luckily we got an offer, I and I took it. But if those like because you can see on showing time, like how many appointments you have out throughout the week or whatever, we only had like two or three, and like Really? Nothing was really scheduled after that.

Dan Austin: [6:42] Wow.

Dylan Koch: [6:42] So it kind of like shocked me a little bit to be like, okay, or is this gonna be like the new normal going forward? Because it was not what I expected by

Dan Austin: [6:49] any means. Wow. That's interesting. So on the sell side too, you're kinda seeing it feel like grindy, not just fast at all.

Dylan Koch: [6:56] Yeah. I mean, don't get me wrong, the offer that we got was great, and I'm happy to accept it. And if they come back with, you know, some line items on inspection, will gladly fix anything Right, they right. But that's so much different than the norm than even what it was like five or six months. Three, really three to four months ago.

Dan Austin: [7:10] I would say we're kind of in the same boat. Like even the last house that we flipped and sold, we didn't get very many showings, but we did have like two legit buyers that put in offers, and I can't remember why we selected one or the other, but one I think had a contingency on it or something like that. But either good full price offers and all that sort of stuff, and one I think was a little higher than the other, and so it was like good, but it felt like the buyers that were looking were actually buying as opposed to just a bunch of like people coming in and walking away. Like even when the market's hot, it feels like, Oh, I've got 30 showings in like two days or something crazy. You

Dylan Koch: [7:41] know? Yeah. No. Like that. And so my ARV for this place was probably, 2 20, 225.

Dan Austin: [7:48] Okay.

Dylan Koch: [7:49] We listed it at $2.14. Okay.

Dan Austin: [7:51] So you went below market.

Dylan Koch: [7:52] And I did that intentionally. Yep. And typically, I would maybe go even higher a little bit, but I underpriced it a little bit. And I'm kinda glad I did, because the worst thing I think you can do right now is overprice it, then you price drop, and then now it's sitting for three months.

Dan Austin: [8:07] Exactly. Exactly. I wonder too, and we talked about this I think a little bit last episode or episode before this, just like the election and as we build up to that, people not wanting to make a decision that it will impact their finances because they're scared of what's gonna happen. I don't know whether you're on a Kamala side or Trump side, like, they're both kinda just gonna sit on the sidelines.

Dylan Koch: [8:28] Well, my personal opinion with this and why we'll continue to invest in real estate is both of them, regardless of who is elected, are going to continue to run multi trillion dollar deficits, which will cause inflation at some point or another.

Dan Austin: [8:43] Woah. Woah. Woah. You're saying that they're not gonna change everything like they said they're gonna change?

Dylan Koch: [8:48] Yeah. Yeah. Right? Yeah. And if inflation happens, then real estate is a good place to have your money parked.

Dan Austin: [8:54] Right. It's a great place.

Dylan Koch: [8:55] Economics one zero one. So could there be a short term deflation if there's a recession, or people lose their jobs? Yes. Yeah. But if you have reserves, and you're placed cash flows, and you're not relying on one extra strategy, I think you're gonna be okay. I think you're gonna be better than okay.

Dan Austin: [9:11] Yeah. I agree. It doesn't matter. You know what else is a good time? This is a really good time. It used to be anyways. More disconnected during this election than I usually have been in the past. Not that I'm, like, super into the politics, but I just feel like I I've been traveling quite a bit the last couple months and just stuff like that. I've just kind of not been paying attention. But usually, it's a good time to start selling guns and bullets because all like the extreme Republicans are like, you gotta stock up on ammo. The Democrats, the Liberals, they're going

Dylan Koch: [9:38] out They're gonna take your guns away.

Dan Austin: [9:39] Take your guns. And it's a great time if you wanna make some money to sell things that might get illegal or become illegal. So, you know, there's a promise to be made all ends of the spectrum on the

Dylan Koch: [9:49] I other if you look at I know we're getting a little bit off on a tangent, but for the audience, so copper, like the commodity that people trade, it's been referred to as Doctor. Copper because essentially its price is indicative of inflation or disinflation or deflation. So it's basically like a one in one correlation. If the price of copper goes up, expect to see inflation. If it goes up at a slower rate, disinflation. If it goes down, deflation. And it has like a very, very good track record. And right now you are seeing it increase like pretty substantially.

Dan Austin: [10:20] Really? So you think inflation is still on the rise?

Dylan Koch: [10:23] I think it's still gonna be a problem. There's still I think it kinda will rear its ugly head again coming around after the election because right now I think they're artificially trying to prop some things up.

Dan Austin: [10:33] Yeah. They're not gonna say certain things anyways, or you know, even if it exists. Even if you're at the Fed, like, they know how to play the bureaucracy, right? Especially if you wanna keep your job.

Dylan Koch: [10:41] Yeah. I mean, you see some of the articles, you know, they say like, for commercial real estate, know, is in a slump, or took such a big drawdown in price, or investors are expecting a six to 7% return. Yeah. Which is dumb if you can get like a four or 5% just buying covered rent bonds. But on top of that, they are talking about REITs, or like big commercial billion dollar companies and funds. You as an everyday main street investor, if you are either borrowing a property, or fixing and flipping a property, or wholesaling a property, that your returns are so outreached from that. It doesn't even matter on

Dan Austin: [11:18] a percentage basis. Totally. It's way different, dude. It's a totally different ballgame. You're talking like an institutional fund versus you in your local market doing something to make freaking money.

Dylan Koch: [11:27] Exactly. Exactly. So like, don't if you see those fear mongering headlines, I shouldn't invest in real estate because Wall Street Journal says it's a bad time, they're not it's apples to oranges comparison.

Dan Austin: [11:36] Yeah. Also, compared to all the other bullshit New York Times and then whatever. Put your favorite news source in there says on any other topic that you happen to be an expert on.

Dylan Koch: [11:45] Yeah. True. Whether that be Fox or CNN or, you know, pick your poison.

Dan Austin: [11:49] Pick your poison. Whatever the topic is that you feel like you're well versed in that's not real estate, and that if you see that article, it's likely that they suck at it. Right? It's like It would be like if you're like really like into baseball, like you're a baseball person, and the New York Times writes an article about baseball and telling you about the sport, you'd be like, you're an idiot. Because they would be. They're not experts. Yeah. They're less likely to be experts than something that you're an expert in. So don't listen to them.

Dylan Koch: [12:12] Which, yeah, which makes you wonder, okay, they write an article about something completely related, you should expect to have that same level of competence in something that you have that competence in.

Dan Austin: [12:20] Exactly.

Dylan Koch: [12:20] Right? There's a name for that, I actually just don't know what it is, but it's the same shit.

Dan Austin: [12:23] Yeah. Think it's called like, I don't know, don't listen to stupid news people that don't know stupid

Dylan Koch: [12:28] Don't listen to people who are paid to write polarizing views on anything.

Dan Austin: [12:33] There you go. That's a good one. Let's acronym that up. Let's figure that

Dylan Koch: [12:36] one out.

Dan Austin: [12:36] We'll wrap it up with it on a t shirt.

Dylan Koch: [12:38] But I did wanna talk about I know you're building a place, and I got a piece of land that honestly, like, it might just be worth the risk because I can buy it so cheap. But it's like an infill lot that's adjacent to It's just before you get the cul de sac part of the street, right? Like the

Dan Austin: [12:54] little half circle. So like a residential area?

Dylan Koch: [12:56] Yeah, residential area, but that cul de sac is all multi family. It's like those four unit brick boxes

Dan Austin: [13:01] Oh, interesting.

Dylan Koch: [13:02] That you see. And he owns this piece of land. I could buy it for $7,500.

Dan Austin: [13:08] K.

Dylan Koch: [13:08] The problem that I'm running into is, like, the topography, it's a little hilly. Yeah. But I don't know how much that costs, like, level it out. And then two, the way it's shaped is, like, there's only 12 feet of street frontage, and then it's like a piece of pizza that goes back that expands. Yeah. So I just I don't never done anything with land. I don't know if it's viable to even build something on that because of how that's set up. And it's kinda landlocked, where you can't really go behind it because there's residential homes, can't go to the left of it because there's homes, and the right of it is a river with a bridge.

Dan Austin: [13:42] Boy, so there's Usually when I see those things, there's a reason why it hasn't been developed, right?

Dylan Koch: [13:47] Right, and that's my first thought too.

Dan Austin: [13:49] So it's 12, is there any way to get easement access, even if it's adjacent to your piece of pie that's coming from the street, that's like you get five or six feet from the other person for like a driveway easement?

Dylan Koch: [14:01] I'd have to talk to that seller. It's possible because right now, the way it looks at least from Google Street View and all this stuff is that the the neighboring property to the left, their parking lot would be on this vacant land, even though it's probably not supposed to be. Oh, interesting.

Dan Austin: [14:17] So you're saying they're already encroaching it a little bit? Yes. Yeah. You said then there's probably some deal you could work there, I would imagine.

Dylan Koch: [14:23] I told him the the seller. I was like, hey, you know, I might go through with this, but before we close, I will order and pay for a survey just to see Yeah. Know, where the boundary lines actually are.

Dan Austin: [14:33] Yeah. I would say that would be important. The other thing I would talk to the city about is like, what is the minimum egress?

Dylan Koch: [14:40] Oh, good question.

Dan Austin: [14:41] That you have to have to like for a driveway. Like, every city and municipality is like very different depending on the length and the width and and all this sort of stuff. And so that would be the one thing I'd be curious about, especially if you wanted to build something more than a single family home on it. Know, they might have a minimum say, if I want to build that same fourplex, although it fits here on the footprint, it doesn't have that same egress capability off of the property, especially with the river there and all that sort of stuff. You're kinda boxed in, it seems like.

Dylan Koch: [15:10] Then I think that's Well, the guy I have no idea how this guy even came to own it, because he has a foreclosure against him for unpaid property taxes of like Nice. 800 And he can't afford to pay it. Wow. So I just, I don't understand

Dan Austin: [15:25] That's pretty fascinating.

Dylan Koch: [15:26] How it even came to be. But my point being is he doesn't have the funds obviously to build it, probably.

Dan Austin: [15:31] Yeah, of course. Yeah, most likely not. So I guess the access would be the first thing I'd look at, and then you said it's kind of hilly. Is it like, how big is this lot? What do mean it's hilly?

Dylan Koch: [15:40] Hilly as in like, you know, I told you there's a river that flows through it? Mhmm. It kinda slopes kinda down gradually. Oh. Like towards that is I And guess is what I mean by it's not small. My county website always puts things in acreage, but it's point two three acres. So a quarter acre? Yeah, quarter acre. Okay. So it's not small.

Dan Austin: [16:01] Yeah, and then the slope isn't a problem, because you can always just build a foundation that would accommodate the slope, right? That's not a big deal. So there's that. You definitely have some land clearing if there's trees and different things you're gonna have

Dylan Koch: [16:13] to Yeah, nothing like that.

Dan Austin: [16:14] Yeah. One thing I was talking, this is a good timely conversation. I was talking to the Skill Group this morning in our coaching call about this because as you mentioned, I am doing a land development play where I'm just doing literally a spec build for a single family home in a development in nice area, probably like an A, I would call an A Class area in Spokane, ten minutes from my house. There's a lot of reasons why I chose that area, mostly because it's near my house. And if it was across town forty five minutes away, I wouldn't want to show up as often, which means I wouldn't learn as much, and I want to learn more about the spec build process. So I've got a GC that I'm gonna partner with.

Dylan Koch: [16:48] We're gonna figure this out together. So I'm gonna interview you now.

Dan Austin: [16:51] Yeah.

Dylan Koch: [16:51] Yeah. How big is the lot?

Dan Austin: [16:53] So the I don't even know. It's I don't know the acreage. It's 50 by 262 feet deep.

Dylan Koch: [16:59] 50 by 262 feet deep. Yeah. Okay. And my high level questions would be with the GC partnering, what approximately would you expect to build on a price per square foot basis or something like this?

Dan Austin: [17:10] I have

Dylan Koch: [17:11] no idea.

Dan Austin: [17:11] Great question.

Dylan Koch: [17:12] Have no idea.

Dan Austin: [17:12] So I do have kind of an idea. So I've talked to a few people. The cost per square foot in our market is to build is probably gonna be like for above ground square feet, like $1.80 to 200 a foot. Depending on what you build, depending on the finishes and all that sort of stuff. So this house will be a rancher. It'll be a 40 foot wide rancher with a daylighted basement because it's on a hill. Okay. Yeah. So it's a Butte lot, so it should trade for a little bit higher than a typical build. So that's a good piece.

Dylan Koch: [17:41] Well, what do you think it'll be sell for on the back end when you're done?

Dan Austin: [17:44] So there is 20 lots in this development. Two or three sold last year for just around 700,000. And then there's one listed right now for $7.85. The guy next door to me is trying to sell the one he's building right now. One, he said he's gonna sell for 1.2. So I've kind of taken these into account. 1.2 is like way off the charts. Like that's it's out as it's crazy, right? But when I looked at it, was like, okay. So a year ago, we had 700. We've already got like six other foundations, eight other foundations going that are in the ground right now that'll sell next year. My guess is they're going to be trying to list for the high sevens and come in somewhere around $7.50, low 7 hundreds. So my like, hell yeah, I did really well is like $7.50. My okay, I guess this average would be 700.

Dylan Koch: [18:33] So if you build a 2,000 square foot home at $200 a square foot, you're all in for 400, that's over $7.50. I mean, I'd say that's a pretty good

Dan Austin: [18:40] ROI. Yeah. And then I've got I've got the lot, and I've got some soft cost permitting, and all that stuff will come into play, which, you know, be a 5 to $10. And then the lot, paid $1.30 for, and then I'll have some I'll probably have like 10 to 12 k in financing cost, cause I will get a construction loan on it. Because really good piece of advice that I learned from somebody in the scale community who does a lot of new builds was that you might have the money now, but nobody's going to lend to you on a half done project, so you might as well just get that lending now. The way spec home builds work is actually pretty cool. It's very similar to hard money where it's prime plus 1%, so it's actually a better interest only rate than hard money typically. They'll do one point origination, and then they will loan up to 75% of the appraised end value. So essentially, say they're like, Yeah, we think it'll be worth $7.50. They'll loan up to $7.50 or 75% of that, and they'll include the land because I paid cash for the land. So they'll include the land in that, so I can get money for the land essentially. And then as you want to, you can do construction draws. Usually quarterly, you'll do So you say you spend $50 just like you would on a hard money loan. So it's very similar. Somebody asked that actually on the calls.

Dan Austin: [19:50] It seems like it's really close to that type of lending. I'm like, It's actually better.

Dylan Koch: [19:54] They're charging you on the full loan amount though, not just the money that you've used during that period like

Dan Austin: [19:58] a HELOC would, right? The interest part of it? That, I don't know. I actually haven't talked to them about that. I've got two lenders on the hook that I'm working with right now to figure that. I don't think that they charge you interest. This is my understanding, that they charge you interest except for on the balance of the loan. Got it. Where if you took a hard money loan out, and then you had construction costs, they charge it all the same, but in that case, you've already withdrawn, say, 200,000 for the acquisition of the property. Right. And maybe you've got a $50,000 I feel like hard money lenders are really good and scrupulous at making extra margin anywhere they can. So Dude, lend me in general.

Dylan Koch: [20:35] Like, you just go through a HUD, you see all the 50 to $500 charges, line items, you're like, god

Dan Austin: [20:40] It's awesome.

Dylan Koch: [20:42] How long do you think this process will take?

Dan Austin: [20:44] A long time. I would say because I bought the land in the fall. We can't build in the wintertime here, so I have to wait till But the I'm a man of action and wanted to take in massive input of action, so I bought the lot. Then this gives me the next couple of months to figure shit out. So I'm working with a designer. I am working with the GC, and I'm going to get a bunch of bids for I'm gonna try to get three bids for each of the sub trades, you know, electrical, plumbing, framing, all that stuff. So I'll have time to figure that out, then I'll have time to like line up the schedule and get on the schedule early with those different trades. And then as soon as we can, maybe if it's a light winter like February, I could break ground and I'd be hoping to sell it by late summer. So,

Dylan Koch: [21:23] yeah. Makes sense.

Mike DeHaan: [21:24] I hope you guys are enjoying this episode. We are seriously trying to grow this podcast so that the voice of what it really takes to grow a real estate business becomes kind of the norm versus the guru get rich quick b s that everyone is fed on a daily basis. With so many podcasts out there, it is hard for us to get discovered on our own. So a quick ask, please share this episode on your social media accounts, be that a real story, whatever. And if you tag me at Mike underscore Invest, then I will give you a follow, and I will also send you a DM so that we can have a little chat about your business and any ways I could potentially help you grow. So again, please share it on your socials. Tag me at Mike underscore invests, that's with an s at the end, and I'll follow you, and we can have a little DM, a convo about your business. And maybe I can help you grow a little bit, or you could

Dan Austin: [22:11] just say what's up to.

Mike DeHaan: [22:12] That'd be awesome. But appreciate everyone, and thanks so much for helping us grow.

Dylan Koch: [22:17] I always see the development plays, especially around town. Like, the big communities too. They're building, like, hotels or big commercial, like, apartment complexes or even spec home communities. And I know they can make a killing, but they're also the most subject to really macroeconomic risks Yes. And time risks.

Dan Austin: [22:34] Absolutely.

Dylan Koch: [22:34] Because once you start, you're committed.

Dan Austin: [22:37] Yeah. So say in your case, let's go back to your piece of land, right? You got $7,500 You're like, hell yeah. I mean, that's a pretty low risk, but say that's a lot of money for somebody. Maybe you have to re entitle it. Maybe you're like, the only way this works out if I can put a quadplex on here, single family home is not gonna work for whatever reason, and you have to rezone it from like R1 to R4 or something like that. And say that takes six to eight months, like it totally could, right? So now you've got your money tied up for six to eight months, and then you have to build it, right? And that on a quadplex is probably gonna be eight months to a year, right, to build it. So you're basically almost two years into something that you decided to do, and the economy, let's be honest, in two years always is different.

Dylan Koch: [23:17] Yeah. Doh. I mean, that's exactly right. And it's like in o eight and stuff, the people who got hurt the most, yeah, like your everyday people got hurt too. But I mean, builders didn't build for ten years for a reason. Exactly. They all went out, and they were all too scared to come back.

Dan Austin: [23:29] Exactly. There's so many guys I've talked to that they're like, yeah. Was doing new builds in o '8, and now I don't do that. Right? Because they just lost their ass. And the part when you hear the term spec build, that's that means speculative. And so the the speculative part of that is that the risk, you're subject to huge wins. Like, guys like, here's a good example. I know people that were building in prior to 2020 and into 2020, and they were hoping. They bought up lots before COVID happened. They bought up ten, fifteen, 20 lots from these land developers, and they're like, Yeah, my exit price is gonna be 600,000. Well, exit prices after the freaking market took off were 900 to 1,000,000. So they just that was just built in. Right? Oh my god. I was gonna make a $150 per house, and I made 350 per house. That you get those huge swings, you're also subject to a huge downside risk. And so I think the guys that do it smart, you have to be well capitalized. You have to be buying land. If you're gonna do several of these, right, you have to be buying land ahead of time so that you can actually keep your pipeline busy. And where the risk is is you gotta be able to build a house and cover any of the debt, or if you're paying cash, be able to withstand a year or two years sitting out there not coming back to you.

Dylan Koch: [24:43] Did you know a lot of the electricians, architects, designers, and stuff already, like, before you did this, or did you have to reach out to those and find out?

Dan Austin: [24:51] No. Because, like, what I found in my side of the business on the flipping is I deal with crackheads and meth addicts Yeah. And stuff like that, and so they're not the same trades. You're you can use them. You know, like flooring guys and stuff like that and painters, you know, those are all kind of the same. But, like, I didn't really know a lot of house framers, foundation guys, flatwork guys, excavation guys. Are things I just don't use. So that's why I partnered with a guy who isn't exist currently is a general contractor, because he's going to bring all those to me, and I can do it fast. Like I said earlier, imperfect action. Right? So like it's not gonna be perfect, but I'm gonna be able to move so much faster than if I was just kind of out there in the ether trying to figure this out myself.

Dylan Koch: [25:28] The reason why I asked that question is because you actually answered it wrong, but I was to No, go through not because you're actually wrong, just because

Dan Austin: [25:36] You're wrong.

Dylan Koch: [25:37] But my point of this next thing is like, always you hear people say, tell people you know what you're doing. Always talk to people about, you know, what you do. There's a deal that got presented to me from a friend of mine who's also, you know, a wholesaler in this business, and I flipped a house over in this area before. It was actually that horror house that I talked about that owned for like a year.

Dan Austin: [25:54] Oh, yeah.

Dylan Koch: [25:55] But during that time, I met a family who really wanted to live in that area, where they were getting advice from a realtor that said, don't buy this. You won't ever resell it, etcetera, etcetera. But my point being is I found he sent me this property. He's like, hey, do you wanna flip it? I was like, no. But I know of a family who might want this because they really wanna build this area. So I texted him. I was like, you guys still looking? He's like, yeah. And we're gonna meet over there tomorrow. But literally, you know, I hope they don't listen to this, but our price is 400,000. I told them 500,000.

Dan Austin: [26:25] Oh, wow.

Dylan Koch: [26:26] Right? And because it's a really great part of town. And my point being is you can't do too much networking, because this is like a very atypical deal where I'm not selling it to another investor. I will sell it to a retail person.

Dan Austin: [26:38] Right.

Dylan Koch: [26:38] Right. But I know a lender who will do double closes even with like for this type of transaction

Dan Austin: [26:44] And for

Dylan Koch: [26:45] that's all just because of going to the networking events, talking to people, and etcetera, etcetera.

Dan Austin: [26:51] Totally. Right. Exactly. And you know, it's funny you bring that up too, because this is I guess I'm gonna take this down another path too, is my pod mates in GoBundance that have encouraged me to take this path. We're talking about how do you scale this because it's different, right? When you're building speculative, technically you can just build a house and throw it up on the market, right? Uh-huh. But that's like a pretty risky way to do it. That's the standard way most builders do it. If you run into a lot of the builders, not all of them, but they're just like we are as far as house flippers go. They're just average dudes, and they aren't usually in masterminds and groups. Like, I feel like the real estate investor community, we've really come together over the last decade and a half and like really created a community and recognized it's a team sport. It's not the same on builder side as much. Like they have builders associations, but that's kind of like an old school thing. It's just less than you would see with us. But, so how do you scale that? And part of it is how do you build a brand with anything in networking, and you know, like you'd have like a realtor open house, but instead of doing that is having networking events at your buildings. Mhmm. Totally. Not open house, but like a networking event where you're kind of the person that's putting it on.

Dan Austin: [27:56] And there could be it could be a totally different topic. It doesn't have to do anything with house building, but you have this brand new, beautiful, vacant home that you've staged. Why not use it for a party to network? Same thing with your flips, you could do the same It's

Dylan Koch: [28:06] like the whole premise of Do you guys have Homerama where you live?

Dan Austin: [28:09] Never heard of it.

Dylan Koch: [28:10] Okay. So basically, a lot of custom builders

Dan Austin: [28:12] Okay.

Dylan Koch: [28:12] Will compete for like the best house, and they'll build five to 10 houses in like a subdivision.

Dan Austin: [28:17] Oh, okay. We have something like that. Yeah. Okay.

Dylan Koch: [28:19] Yeah. Yeah. Probably just call it something different. But they literally put on a show for like potential buyers for one. But two, that way if you're ever considering buying a home, you're like, oh, I really like that house. Then we went to Homorama, you looked up who built that house, and you reach out to them. It's like all comes down to marketing, which just seems like most businesses in some way, shape, form comes down to some level of marketing.

Dan Austin: [28:36] 100%, and it's getting your brand out there. And I kind of thought about this idea. I have a friend in a totally different industry, and he was talking about, he works for a marketing company, and they put on events. Has nothing to do with them being the marketers. They're just putting on events for, it could be a public action thing that they're calling for, but because they're the ones putting it on, they have this authority, and then they become the focal point of that network. Anytime anybody needs marketing, they're gonna call them, because guess what? Everybody in the community knows who this marketing company is. The same thing can go for your business. You don't have to kinda be in the shadows, and you just have to understand who you're trying to connect with. To your point, like your situation, like with selling that house, it's not a typical real estate investor. So, going to the Ria meetings, it's not gonna accomplish that for you.

Dylan Koch: [29:18] No, it's not. But part of it is just figuring out how to sell the freaking deal.

Dan Austin: [29:23] It is,

Dylan Koch: [29:24] is, That's what it comes down to.

Dan Austin: [29:26] Dude, it's so true. Right now, this is so top of mind. So, we're, you know, dispoing at different various properties in Spokane right now, and they all like It used to feel like you could just dispo, and there was just enough investors lined up. It didn't matter what it was, they would buy it. And then where Mike and I really cut our teeth was like doing the weird shit and connecting with the different people that aren't necessarily you're going to meet at a Ria. You talked about this land development play. So we have a guy that he doesn't go to Ria meetups. He's loosely engaged in the real estate community, but he does like a lot of new builds. He specifically looks for infill lots or lots he can subdivide, sell the house off, and build a house on. Right? High level guy, like he's building all these places for cash, selling them. Like he doesn't really use debt, doesn't use hard money, much of that. Like he's been around a long time, and so great guy to know. And there's other buyers like that, or buyer's agents. When you have that weird one that's like a retail ish type buy, can you call like, just dispo'd one? So this guy out of Western Washington, which is like four hours from us, had a deal over here. He needed help discipline. He asked a couple other wholesalers, and I go, we can't move it. Sorry, it's not a deal. He came to us, and we called an agent that had a retail ish flipper that wanted to flip, but has no other connection to the industry except for through his agent.

Dan Austin: [30:40] So guess what? Agent's making $5. I think we're gonna make like It's gonna be a small deal, like $6 on the JV side of things, but still, it's like money that just

Dylan Koch: [30:48] $6, $6, man.

Dan Austin: [30:49] Fell into our lap because we were able to connect a buyer to this house that was a nontraditional buyer.

Dylan Koch: [30:56] Agents are great, honestly, to work with, because they will have instead of one buyer, they represent, you know, five to 10. And my piece of advice, anyone that's starting out of this, and I don't know why people more people don't do this, is because they just try to mass market it. But if you have a deal, you get locked up, literally go on PropStream, or Zillow, or your county, or whatever, filter by cash buyer within a point three mile radius, and start calling those people.

Dan Austin: [31:20] Right.

Dylan Koch: [31:21] Because proximity is usually the biggest determining factor, other than price, of who's gonna buy your next

Dan Austin: [31:26] That's a really good point.

Dylan Koch: [31:27] I have sold so many deals like that.

Dan Austin: [31:29] Well, you know they're buying in that neighborhood. You know they like that neighborhood.

Dylan Koch: [31:32] Yeah. Especially if they bought recently, oh, have two crews, or I can have both my guys just go back and forth and keep them busy. That's gold to them.

Dan Austin: [31:39] It is gold. That's good advice.

Dylan Koch: [31:42] One thing I wanted to ask you about, because my wealth started to go up when I stopped having squirrel syndrome. You know, going from Airbnbs to residential assisted living to just sticking with the wholesaling and the flipping. And also, it's just very repetitive and can get boring after a while. Yeah. And that's where you kinda have to like, nose to the grind and keep going. Yeah. You know, how did you make that kind of decision with learning something new, diving into this new build, etcetera?

Dan Austin: [32:10] Yeah. Good question. So it's adjacent. I'll start with saying it's very adjacent to what I'm already doing, you know, running all the flips, doing all the construction. It's also a passion that I wanted to get into and learn anyways, but it's also at a time where we're winding down a bunch stuff talking about the squirrel syndrome. You know, Mike and I are selling one of our businesses. We're shutting down another business, and we're focused locally hardcore on the wholesale flip model. Like, keep doing the wholesales, keep doing the flips. We're not even I say wholesale flip, guess if like a good opportunity came, we'd buy it. But we're really focused on that cash accumulation, drive, drive, drive, drive, because we know how to do that. It's easy. It is boring. Fortunately, in this business, I have partners so that my time allocation to that does not have to be 40 to 60. I'm not like you, where you're just running your business, which is a good thing because you're getting a 100 of the proceeds of everything you do. Mine is split up, which is fine. We're able to multiply that, but it still leaves me with time.

Dylan Koch: [33:02] What's funny is is I bet if you look at our net incomes, which we won't disclose here, but I bet they're pretty close.

Dan Austin: [33:09] Probably.

Dylan Koch: [33:09] Yeah. With me being a single operator, and what you guys do on a team of four or five, whatever it is, with this larger scale.

Dan Austin: [33:16] Yeah, exactly. And I think that there is a limit. There's a ceiling to that, right? Where there's probably a different crossover, where it starts becoming you start getting better, and more and more and more, then you hit a cap, the same thing with us. And I bet you income to income, depending on how I have to split it up, is not too far off when you hit that cap too.

Dylan Koch: [33:35] Yeah. But I can't go to Thailand for a month

Dan Austin: [33:37] You cannot do that.

Dylan Koch: [33:38] And expect to keep making money.

Dan Austin: [33:40] You cannot do that.

Dylan Koch: [33:41] So there those are the trade offs.

Dan Austin: [33:42] There is an advantage to partners. There is an advantage to that. And then if then your partners are okay with you building a new spec build and trying to figure your shit out, then that's also a fun

Dylan Koch: [33:50] thing you can do too. Totally. I mean I had a contractor today who I sent to walk a property for me, and he wants to start getting into new builds. And he wanted to do Build to Rent.

Dan Austin: [34:00] Mhmm.

Dylan Koch: [34:01] And I'm like, I love the idea. Yeah. But it's almost like a thing where so few people do it. I'm like, why don't more people do this?

Dan Austin: [34:07] It's hard, that's why. Because typically new build costs are higher than buying a used property. I mean, that's just the thing of However, it, I will say this, and then we can close this out. Was at the GoBundance event last week in Scottsdale, and there was a company called Origin Investments there just talking generally about high level market update. And they got and this is, granted, big giant billion dollar, basically a REIT. Right? They're buying big assets. They make Brandon Turner's company look small. Right? Big time stuff. But they're talking about how they got away from the buy, fix, sell model several years ago, and found that actually it's cheaper long term, and you build more equity by doing, you know, shovel ready projects. Interesting. Buying and building and buying and building apartment buildings. And I happen to personally know somebody that does that at a pretty high level. He owns quite a few units outright, and then obviously this company's not talking about that because it's a shitty way to go, because their fund is obviously doing well. And so there could be, at a point in time where we're at in history, that new construction from a residential buy and hold standpoint could be better, you know, than that whole buy a shitty house. And I think a lot of people on the cash flow side are feeling the shitty house thing, or a shitty multifamily, because there is a lot of capex. And his reasoning that he explained was, Why would I go and buy the nineteen eighty five, you know, 300 unit apartment complex, and it's gonna take me five years to go through the process of like fixing it up, and raising the rents, the value add process, and then across the street, somebody else builds a brand new 300 unit apartment building, and it takes the exact, it takes five years, the exact same amount of time. Which one sells a trades reward? It's the brand new one.

Dan Austin: [35:51] He's like, So we're gonna buy the thing. It's basically gonna trade at the same anyways on the buy, and all the fix, and the time to do it, and there's so many unknowns with that, and so many risks when I could just go put a shovel in the ground, build the thing, and it's gonna already trade for more than that. So that was kind of their logic there. So I think there's some good logic there when it comes to making that decision. The difference is the capital that you have to have, and the capital that you have to lock up, because we've all been so used to this idea of buy it, fix it, and borrow all your money out of it, so it's an infinite return, which seems to be challenging right now. I think we as off market operators have the most opportunity to do that, but it's still tough to cash flow.

Dylan Koch: [36:29] Yeah, and like if you want to cash flow more, then you have to take out less leverage. Yep. And less leverage means that your ROI isn't the highest. Exactly. It's always what lever you wanna pull at a specific Totally. But that's interesting. I think new build is it could be on the plate for us someday too, but just not right now. Just see, I think we're gonna stick with one lane for

Dan Austin: [36:45] a while. Don't squirrel it, man. I agree. I think that's a good strategy for everybody, except for, you know, once you get a little hungry and you're ready to do something else. Anyways, that's all. I think we're over time here. Thank you everyone for listening to Dylan and I ramble about things that we're truly interested in. Hope you find some interest in that as well. Maybe we'll rift this for a few weeks while Mike's gone, and it'll just be just be the Dan and Dylan show.

Dylan Koch: [37:06] Yeah. Or just send us a DM and let us know what you want us to talk about or speculate on. And then

Dan Austin: [37:11] Yes.

Dylan Koch: [37:11] And then we'll have the content, and I don't have to go find it.

Dan Austin: [37:14] Exactly. Hit me up at investor man Dan on Instagram is where I'm most active. If you don't use Instagram, I don't

Dylan Koch: [37:18] know who you are. You're a gen z. You're a

Dan Austin: [37:20] gen z. That's true. You know what? And if you're gen z, I'm sorry. I can't help you. We

Dylan Koch: [37:24] don't have TikTok, but, Dylan does deals on Instagram.

Dan Austin: [37:28] Is there an underscore in that?

Dylan Koch: [37:29] There is. Dylan underscore does underscore deals.

Dan Austin: [37:32] So I like it. Alright, guys. Hope you enjoyed this. We will catch you all next week. See you.

Dylan Koch: [37:37] See you.